Cable & Wireless confirmed recent market speculation and revived its plan to split into two businesses, but it was probably not the best idea to accompany the news with a warning of lower than expected earnings.

The telecoms group plans to demerge its worldwide division - which covers Europe, Asia and the US - from its international business, a supplier of fixed line and mobile services in the Caribbean, Macau and Panama. More details of the proposal - which was put on hold a year ago because of the poor market conditions - are due by the end of the month.

But at the same time C&W cut its full year earnings guidance for the international business from $935m to a range of $880m-$900m, mainly thanks to a disappointing performance in the Caribbean. For the whole group the guidance falls from £1.025bn to £1bn.

Commenting on the demerger plans, analysts at FinnCap said:

The conundrum for Cable & Wireless (and Carphone Warehouse, for the same reason) is how much will demerger release value and how much that will already have been catered for in the widespread expectation of the event. C&W management will be excited as a demerger is a vesting event for the remainder of their controversial LTIP, but how can investors benefit apart from having visibility of the removal of group headquarter costs, (assuming the two divisions are self administrating now and need not increase divisional support functions)?

Analyst Chris Alliott at RBS kept his buy rating on the business but warned:

Worldwide looks to be performing well from the gross margin level down, but the lower guidance [for the international business] is a disappointment. While the market has seemingly been keen for a demerger, the uncertainty surrounding the timing and the performance of one of the two components could temper enthusiasm in the short term.

As indeed it has, with C&W's shares down 9.1p to 138.9p, making the company the worst performer in the leading index. The bears would have been pleased with the price fall. According to figures from Data Explorers, the percentage of the company's shares out on loan has tripled in the past week from 0.5% to 1.7%, indicating an increase in short selling ahead of the figures.

Overall the market recovered from an early fall thanks to the Bank of England's plan to increase its quantitative easing programme by £25bn and an opening rise on Wall Street after better than expected data on jobless claims and productivity. All eyes will now be on tomorrow's US non-farm payroll figures which are likely to set the tone for the market heading into the weekend. Ahead of that, the FTSE 100 finished 17.75 points higher at 5125.64.

Retailers continued to benefit from this week's updates from Next, up 44p to £19.56, and Marks & Spencer, 2.6p ahead at 364.1p, while Rentokil Initial rose 3.2p to 112p following a positive note from Bank of America/Merrill Lynch.

SABMiller added 24p to £16.40 as Evolution Securities raised its recommendation from sell to neutral. Evo believes SABMiller is the most likely buyer of the beer operations put up for sale by Mexico's Femsa at the start of last month, although Heineken is another possible purchaser. The broker said:

With a strong balance sheet and its equity seen as an attractive currency by exiting brewing dynasties, SABMiller should be at the forefront of the next round of industry consolidation. Having sat on the mergers and acquisitions sidelines since 2005, the group is keen to scale up before the hunter becomes the hunted of a deleveraged Anheuser-Busch-InBev.

SABMiller is the frontrunner to buy FEMSA's beer business. However Heineken's prospects are also good and a competitive auction is likely. Our base case scenario is for SAB to acquire Femsa Cerveza for $7.45bn. The $169m of hard cost savings would drive earnings accretion of 4% in year three – equivalent to 90p a share.

However, with SABMiller shares having risen around 10% since Femsa management announced it was reviewing the options for its beer assets, this is already discounted in the share price. Additional synergy capture is required to move the shares higher.

This could mean co-distributing soft drinks with beer, although this would need the approval of Coca Cola. Evo said:

Beer and soft drinks integration [in Mexico] is key: [this] is likely on an 18-month view and would change the financials on any deal significantly. We estimate cost savings could increase to between $379m and $795m, depending on whether SABMiller (1) shared the integration benefits, or (2) also acquired Coca-Cola Femsa. If successful and with the pace of global brewing consolidation set to slow, we believe SAB could turn its attention to consolidating emerging market soft drink bottlers. Coca-Cola Hellenic could be its next target.

Elsewhere Invensys dropped 9.3p to 290.1p. In its half year results the engineering group repeated that its full year performance would better last year's but warned of weak orders at its operations management division. Analyst Jeremy Batstone-Carr at Charles Stanley said:

Investors in Invensys are going to have to hope that the benefits from restructuring/cost saving initiatives emerge over the second half, coupled with the group's apparent exposure to any increase in oil and gas capital expenditure spending and an improvement in the residential property market. The share price has, however, anticipated much of this expected improvement already, rising by around 75% over the past six months alone. We will wait for more concrete signs of turnaround before upgrading estimates and in the meantime the shares are by no means cheap on valuation grounds and only offer a sub 2% dividend yield. We maintain our reduce recommendation.

Insurer Resolution lost 2p to 95p on its first day in the FTSE 100 following the completion of its takeover of Friends Provident.

British Airways is set to report a second quarter (peak season) loss tomorrow. We are forecasting revenues down 15%, driven by yields down 17% (fuel surcharge unwind). As a result we are forecasting a £145m pre-tax loss. With weak trading and risk of strikes at BA, it is likely to continue to be a bumpy ride for the shares. Despite the timing delay, we still believe the American Airlines anti-trust immunity will happen, as well as the BA/Iberia deal. For these reasons, we remain buyers of the stock (302p target price.)

Pharmaceutical firm BTG is among the biggest fallers in the mid-cap index, down 9.8p to 183.2p after its half year results revealed manufacturing problems with its two anti-poison treatments. BTG blamed "technical issues at a third party supplier" for lower than expected sales of CroFab - used to treat snakebites - and DigiFab, an antidote for digitalis overdose.

Residential landlord Grainger slid 17.8p to 253.6p as it announced plans to raise £250m, partly to help cut its borrowings, with a two for one rights issue at 90p a share.

Lower down the market Hutchison China MediTech climbed 16p to 186.5p after successful phase 2B trials of its HMPL-004 treatment for ulcerative colitis. Analysts said the next step would be to partner with a major western pharmaceutical company to take the drug through phase 3 trials and then into production.